Non-competitive imports and gains from trade

The paper argues for the explicit inclusion in international trade models of goods which cannot be produced in the importing country. Non-competitive goods require a product-requisite factor which is not universally available. International trade in these goods generates much greater per-unit gains from trade than trade in ordinary goods which can be produced in both (all) countries. Omission of these goods from models of international trade leads to the possibility of a gross underestimation of the difference between autarkic and with-trade income levels. The omission of these goods also neglects some dimensions of policy which are important in the real world, such as sanctions.